CHAPTER 3

Developing Project Proposals

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Chapter Concepts
• Building relationships with customers and partners
• Proposal marketing strategies
• Decision making to develop a proposal
• Creating winning proposals
• The proposal preparation process
• Elements that may be included in a proposal
• Pricing considerations
• Customer evaluation of proposals
• Types of contracts between the customer and the
contractor
• Measuring the success of proposal efforts

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Learning Outcomes

• Develop relationships with customers and partners

• Decide whether to prepare a proposal in response to a
customer’s RFP
• Create a credible proposal
• Determine a fair and reasonable price for a proposal
• Discuss how customers evaluate proposals
• Explain types of contracts and various terms and
conditions
• Measure the success of proposal efforts

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Project Management Project Procurement
Knowledge Areas from Management
PMBOK® Guide

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 Why is this statement
Discussion true?

Customers (clients) and partner

organizations prefer to work with
people they know and trust.

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 • Organizations know what to
Answer expect.
• Organizations know they will get
• Why is this statement true? a good product.
Customers (clients) and • They know how each party
partner organizations prefer communicates and
to work with people they communications may be easier
know and trust. than with a stranger.
• Past knowledge of the
organization helps the customer
perform the same work for less
money because they have gone
through the learning curve
already.

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Building Relationships
with Customers and Partners
• Foundation for successful funding and opportunities
• Requires good listening and constant learning
• Frequent and regular contact; express appreciation for
the client’s time
• Trust is key and ethics are imperative
• First impression is important
• Problem solving and credibility grows with good
performance
• Partner with several key individuals in an organization

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 Building effective and
successful relationships
takes time and work;
it does not happen overnight.

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Building Relationships with Customers
• Ethical behavior in dealing with clients and partners is
also imperative for building trust.
• The first impression you make on a client is pivotal to
developing relationships.
• Clients want to work with people who can solve
problems, not with those who merely identify them.
• Build credibility based on good performance.
• build relationships with several key people in a client
or partner organization, since key individuals may
leave the organization while others become more
influential.
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Pre-RFP/Proposal Marketing

• Begin developing the relationship before RFP is prepared

• Can help client identify needs
• Better position to win the contract
• Develop a more clearly focused response to RFP
• Pre-RFP and pre-proposal efforts are business development
• No cost to the customer
• Help build the relationship
• Unsolicited proposals and uncompetitive contracts
• Result of identified needs and problem solving
• Eliminates preparation of an RFP and soliciting process

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 Why should contractors
not wait until an RFP is
Discussion announced to start
developing the proposal?

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 • Proposal development times are
Answer often very short
• Can develop a better proposal in
• Why should contractors not response to the RFP
wait until an RFP is
announced to start • Prepare for bidders’ meeting
developing the proposal? • Increase percentage of
proposals being funded
• Proposal development takes
effort

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Decision to Develop a Proposal

• Development is costly and time consuming

• Contractors must be realistic about their probability of
winning a contract
• Evaluate bid/no-bid decision
• Many non-winning proposals hurt reputation
• May be hard to decide to no-bid an RFP

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Bid or No-Bid?
Factors to consider
1. Competition—which other contractors might also submit a proposal?
2. Risk—is there a risk that the project will be unsuccessful (either technically
or financially)?
3. Mission—is the proposed project consistent with the contractor’s business
mission?
4. Extension of capabilities—would the proposed project provide the
contractor with an opportunity to extend and enhance its capabilities?
5. Reputation—what is the contractor’s reputation with the customer?
6. Customer funds—does the customer really have funds available to go
forward with the project?
7. Proposal resources—are appropriate resources available to prepare a
quality proposal?
8. Project resources—are appropriate resources available to perform the
project if the contractor is selected as the winner?
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Discussion

Bid or No-Bid?
Should a proposal
be submitted?

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 • Yes, a proposal should be
Answer developed
• Positives
• Bid or No-Bid? • Rated highly in five categories
Should a proposal be
• Low risk project
submitted?
• Reputation and experience
could outweigh lack of
familiarity with the client

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Creating a Winning Proposal
The proposal process can be highly competitive and a proposal is a selling
document - not a technical report.
• Selling document
• The best idea to solve the
problem
• Highlight unique factors
• Emphasize benefits to the
customer
• Be simple and concise
• Addresses requirements
from RFP
• Be realistic

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Proposal Preparation
• Proposal team
• Can be one person or many
• Various skills and expertise
• Proposal manager for large proposals
• Proposal development
• Time for writing, review, and management approval
• Length dependent upon the RFP requirements
• Cost of proposal development is part of normal business
costs
Customers do not pay contractors to prepare proposals. Contractors absorb the
costs of proposal development as part of normal marketing costs.

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Proposal Contents

• Three sections
• Technical
• Management
• Cost
• Detail level
• Depends on complexity of the project
• Requirements from the RFP

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 Technical Section
• Understand the need
Show that they thoroughly
understand the problem to be
solved.
• Proposed approach or solution
Describe the approach or
methodology that would be used in
developing the solution.
• Benefits to the customer
Show how it would benefit the
customer and achieve the project’s
success criteria
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Management Section

• Description of major tasks

• Deliverables
• Project schedule
• Project organization
• Related experience
• Equipment and facilities

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Cost Section
• Include estimated costs
• Labor
• Materials
• Equipment
• Facilities
• Subcontractors and
consultants
• Travel
• Documentation
• Overhead
• Escalation
• Reserve
• Fee or profit

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 Why is it beneficial to have
a person who would be
Discussion
responsible for the major
work tasks to help write
the project proposal?

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 • The person can estimate the
Answer project organization, schedule,
and costs more accurately.
• Why is it beneficial to have a • The experience will be reflected
person who would be
in the language used to describe
responsible for the major
work tasks to help write the the solution.
project proposal? • The person can list related
experiences that show
expertise.
• The person can describe what
makes the contractor unique
and demonstrate the benefits of
the solution.

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Pricing Considerations
• Competition
• Price
• Not overpriced or
underpriced
• Factors
• Reliability of cost estimates
• Risk
• Value of project to the
contractor
• Customer’s budget
• Competition level

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Simplified Project Proposal

Complex Simplified
• Large number of pages • Statement of the
customer’s need
• Defined sections
• Assumptions
• Charts and figures • Project scope
• Tables of information • Deliverables
• Resources
• Schedule
• Price
• Risks
• Expected benefits

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Proposal Submission and Follow-up

Submission Follow-up
• On time • Be proactive
• Formatted properly • Professional manner
• Sent in manner required • Follow RFP guidelines
• Hard copies
• E-mail
• Electronic form
• Two sets by different
delivery methods

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Customer Evaluation of Proposals

• Customer sets criteria

• Customer may request a
best and final offer
(BAFO)
• Helps to have common
comparison criteria

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 List examples of criteria
used by customers to
Discussion evaluate contractor
proposals.

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 • Compliance with the customer’s
Answer statement of work (SOW)
• Understanding of the
• List examples of criteria used problem/need
by customers to evaluate
contractor proposals. • Soundness of the proposed
approach
• Contractor’s experience with
similar projects
• Experience of key individuals
• Management capability
• Realism of schedule
• Price

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Contracts

Agreement Types
• Contract must be signed • Fixed Price
before starting work • Price remains fixed
• Establishes • Low risk for customer
communication • High risk for contractor
• For well-defined projects
• Agreement of deliverables
with little risk
for a certain price
• Cost-Reimbursement
• Price for actual costs
• High risk for customer
• Low risk for contractor
• For higher risk projects
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Contract Terms and Conditions
• Misrepresentation of costs
• Notice of cost overruns or schedule delays
• Approval of subcontractor
• Customer furnished equipment of information
• Patents
• Disclosure of proprietary information
• International considerations
• Termination
• Terms of payments
• Bonus/penalty payments
• Changes

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Measuring Proposal Success

Measures Strategies
• Win ratio • Submit many to win fair
• Number won/number share
submitted • Increase chances of winning
• All proposals weighted • May be viewed negatively
equally
• Bid on potential successes
• Total dollar value • Respond where better than
• Value won/value submitted average chance to win
• More weight to larger values • Must have bid/no-bid process

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Critical Success Factors
• Customers and partner organizations prefer to work with people they know and
trust. Relationships establish the foundation for successful funding and contract
opportunities.
• Establishing and building trust is key to developing effective and successful
relationships with clients and partners.
• The first impression one makes on a client is pivotal to developing a continuing
and fruitful relationship.
• Pre-RFP/proposal efforts are crucial to establishing the foundation for eventually
winning a contract from the customer.
• Do not wait until formal RFP solicitations are announced by customers before
starting to develop proposals. Rather, develop relationships with potential
customers long before they prepare their RFPs.
• Working closely with a potential customer puts a contractor in a better position to
be selected as the winning contractor. Learn as much as possible about the
customer’s needs, problems, and decision-making process during pre-
RFP/proposal marketing.
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Critical Success Factors (continued)
• Becoming familiar with the customer’s needs, requirements, and expectations will
help in preparing a more clearly focused proposal.
• Be realistic about the ability to prepare a quality proposal and about the
probability of winning the contract. It is not enough just to prepare a proposal;
rather, the proposal must be of sufficient quality to have a chance of winning.
• A proposal is a selling document, not a technical report. It should be written in a
simple, concise manner and should use terminology with which the customer is
familiar.
• In a proposal, it is important to highlight the unique factors that differentiate it
from competitors’ proposals.
• Proposals must be realistic. Proposals that promise too much or are overly
optimistic may be unbelievable to customers, and may raise doubt about whether
the contractor understands what needs to be done or how to do it.
• When bidding on a fixed-price project, the contractor must develop accurate and
complete cost estimates and include sufficient reserves.

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Summary
• Interested contractors develop proposals in response to a customer’s RFP.
• Relationships establish the foundation for successful funding and contract opportunities.
Relationship building requires being proactive and engaged.
• Contractors should develop relationships with potential customers long before customers
prepare an RFP.
• Because the development and preparation of a proposal take time and money, contractors
interested in submitting a proposal in response to an RFP must be realistic about the
probability of being selected as the winning contractor.
• It is important to remember that the proposal process is competitive and that the proposal is
a selling document that should be written in a simple, concise manner. In the proposal, the
contractor must highlight the unique factors that differentiate it from competing contractors.
• Proposals are often organized into three sections: technical, management, and cost.
• Customers evaluate contractors’ proposals in many different ways.
• Once the customer has selected the winning contractor, the contractor is informed that it is
the winner, subject to successful negotiation of a contract: fixed-price and cost
reimbursement are the two types of contracts.
• Contractors measure the success of their proposal efforts by the number of times their
proposals are selected by customers and/or by the total dollar value of their proposals that
are selected.
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